One of the biggest challenges for any freelancer, new or old, is knowing how to price up their services and projects.
If you’re not comfortable with selling and negotiating, and let’s face it, most of us freelancers aren’t, then this can be a very tricky and unpleasant part of the freelance process.
There is a double-whammy of worrying about pricing too low and wasting time, as well as quoting too high and scaring off the client.
One thing I’ve also noticed – especially in the UK (thanks to old fashioned British politeness I assume) – is that clients are also actually reluctant to negotiate at all. If you simply send a fee across in an email – it will often either be a yes or a no. Which raises the stakes even further, as you tend to have one shot to get it right.
So how do you go about pricing your services correctly?
The key to pricing well lies – like most things when freelancing – in having the right mindset, and being comfortable knowing your worth.
This puts you in control, as you begin to get a feel for how much you should be charging, and whether a project is worth your time or not.
It’s also worth remembering that many clients do not really care about the price primarily. They want someone that they can rely on to do a good job.
There will always be someone cheaper than you in this interconnected world – so competing on price is usually a mistake if you want to make a reasonable living from freelancing.
Make your own reality
We talk about this a lot, but it’s crucial when it comes to pricing your services: You make your own reality.
If you have decided in your head that nobody is going to pay you very much and that there are countless better options than you, then you will always prove yourself right.
If you decide that you’re going to charge enough to earn a proper, sustainable living – without having to work 24 hours a day, then chances are you will also prove yourself right.
This is a simple thing, but it’s so crucial.
Simply making the decision to be expensive, and sticking with it, can have a revolutionary effect on your mindset and your business.
Another issue comes with placing too much emotionally on a client enquiry or request for a quote. If you’re not reaching enough prospects, then each enquiry feels much even more vital to your livelihood. This drives down your price, as you fear losing out on the much-needed money.
This starts a downward spiral, as you begin working on projects for longer, that pay you less. You then don’t have time to attract the high-value projects and are left struggling in this negative cycle.
Work on improving the number of leads you’re getting, and you will quickly begin to feel more confident and in control of your situation.
Key things to consider before quoting
The main mistake many freelancers make is in undervaluing themselves and their time – and I’m not just talking through lack of confidence.
The fact is, as a freelancer, just like a real business you do not receive all of the fees you earn. It is helpful to remind yourself of this on a regular basis, as chances are you are underestimating the costs of running your business.
As a freelancer, your fees should allow you to earn a comfortable living – and there is no shame in that.
Additionally, they also need to cover the following as a minimum:
- A pension
- Sick pay
- Holiday pay
- Marketing costs
- Equipment costs
- Times spent on finances and admin
- Office space
- Software and subscriptions
- Training and courses to improve your skills
- Travel costs
- Time in meetings and on the phone
This list is far from exhaustive, but you can already see that there are loads of hidden costs associated with being a freelancer. It’s easy to forget about these when pricing your services, but if you want to build a longterm business, you need to account for them, and not be ashamed about it.
You are a business, so you need to act like it, and charge the right amount to cover these costs and make a living that makes it all worth it.
Remember that your client is saving on all of these costs when they use a freelancer rather than an employer, so you need to factor them in.
Equally – people irrationally value things that are expensive more than those that are cheap or even free.
If someone emailed you and offered to write your blog for free, you’d probably ignore it. The fact it’s free makes you think it’ll probably be worthless junk then.
This is true with low quotes too.
People want to spend money – and they value spending more money because they convince themselves that it’s worth it. ****
If you quote too low, your clients will stop valuing you and the work you produce. They will be wondering what’s wrong with it or what the catch is.
This is especially true in business – don’t forget most clients are spending other people’s money, so it’s not as personal for them as it is for you.
How to quote for a project
So a client’s email has just landed on your desk. They like what you do, and have asked about your rates for the project. Here are a few things to think about, before you reply and send over a quote.
The first thing to understand is that there is no magic formula. Your quote for the same project is likely to be different for different clients. And that’s okay. It may sound a little odd, but you need to price based on your time and feelings towards the project.
Here are some things to consider before replying:
Do you actually want the job?
If the brief alone is making you dread working on the project, then it’s time to hike your price up. Go for a figure that is high enough that you’d actually be excited to work on the project because of the reward.
You’ll also be surprised how often clients accept your ‘crazy’ high quote without blinking too.
Is it urgent?
Your time and your schedule also have value. If a client needs you to work on something quickly then that’s fine – but they should pay more.
Be clear and firm that there is an urgency fee, and remember the client really does need you in this situation. They are paying extra for your reliability and your ability to save them from a sticky situation.
Will it stop you doing other things?
Remember that your time is finite. If a project will stop you doing the things you need to be doing, or working on more important work, then you either need to turn it down or price it appropriately.
What’s the best way to price projects?
There are several ways to work out how you will price, and they all have pros and cons. Most freelancers, when they are first starting out, go for an hourly rate.
Hourly pricing is simple and effective. Clients understand it and often expect it, and it becomes easy to work out how much you will charge for work.
If the project changes, or it takes you longer, then you can ensure your time is fully paid for, without having to renegotiate.
Hourly pricing can be great to start out with, but it can also be very limiting, and increasingly problematic as you get better and more experienced.
The main issue with hourly pricing is that you can be penalised for getting better at your work. When you first started, it may have taken you two days of bumbling around to write a decent article or design a poster.
As you build your experience, invest in better equipment, and spend money on training and courses, you may be able to complete the exact same project in a couple of hours.
Of course, the problem is you’ll be paid a lot less in the second example – even though the end product will be the same or likely even better.
Another issue, especially when clients know that you are charging them based on time, is that they can start to grind you down, and have too much knowledge of your process.
You’ll start to hear – ‘this will only take you 20 minutes right?’ and similar statements with longterm clients, and you’ll start to feel resentment and bitterness unless you do something about it.
Many freelancers choose hourly pricing because they think clients like it. And that’s partly true. In reality, clients think they like it, but they don’t really.
Nobody likes uncertainty. And the major issue with hourly pricing is that clients hate not knowing how much of their budget they will be spending. They want to be able to plan properly, with a fairly fixed figure.
Hourly pricing leaves too much uncertainty and too much space for nasty surprises.
Hourly pricing just tends to be the easiest to understand, which is why it’s so popular.
Allowing clients to book you for a number of days can be a good tactic in some circumstances, and you can usually offer a little discount on your hourly rate.
The same issues can apply, however, which is why where possible I think a Project Fee is better.
Giving a fixed project fee is a simple and effective way to price. You don’t need to offer any information about how long the work will take you, and both parties will have some certainty about the costs going in.
You can break this down into stages, or simply give the client the whole figure.
Be careful, and take your time over this. Talk to the client to ensure you understand the full scope of the project before pricing it. You will also want to set clear limits to avoid scope creep.
This allows you to price based on value rather than time – which is a key differentiator between freelancers who struggle and successful ones.
It’s worth arranging a clear agreement about what will trigger an increase in costs before signing anything.
The principle of pricing on value is simple. If you rewrite a sales page copy, and that leads to an 800% increase in sales for your client – how is it fair that you are only paid for the two hours you worked on it for.
You have created massive value for your client, so you should base your price on this.
Other things to think about when pricing
Now you know the best ways to price your services, it’s time to think about a few other factors that can have an impact on how you set your pricing.
If you’ve done the mental arithmetic and determined that the project will take you five hours to complete, it’s always good to build in a bit of leeway.
Projects invariably take longer than you expect to complete. Complications will arise, the client will go back and forth and you’ll need to tweak things somewhere that you’re not expecting – so factor this in from the start.
If you finish it in the time you originally expected – or even sooner – then great! You are a business and it’s ok to make a profit – even if you’re doing something you enjoy.
Don’t discount for potential future work
This is a common problem with new ones – they will often mention that they have future work for you if this one goes well.
While sometimes this is true, unfortunately, it’s often not and it is simply a way to drive down your price.
Price for the project you are going to be working on – not for a vague promise of future work.
Is there a big budget?
As you work with bigger clients, you’ll often find they are expecting to spend more. If they work with big agencies, then they will be used to spending a lot – and not necessarily receiving value for their money.
This is why it’s always a good idea to try and find, or at least get a sense of, the client’s budget. This isn’t unethical or anything like that.
If there’s a big budget you should know – otherwise, you won’t give the project the attention it deserves. For example, you may want to outsource elements to specialists or spend longer developing truly innovative concepts.
If you underprice, the client may be initially happy at getting a bargain, but chances are you won’t treat the project with as much importance as you would if you were getting paid more.
How to find out a client’s budget
Rather than blurting out a number, spend some time talking to the client about the project, and get a sense for what they are looking for and expecting. Listen to what they are saying and ask questions that get to the heart of the project.
You can then ask for a vague idea of what they are looking to spend, so you can tailor your service and pitch to their specific project.
I find this question works 80% of the time.
Don’t be pushy, it’s their right not to tell you. But this secrecy doesn’t really help anyone.
If you are asked to give a project fee, it can help to give a range – so £5,000 to £10,000 for example. You can then ask if this sounds right for their budget. This gives you a lot of leeways, and will often open up a discussion. Simply plucking one figure out of the air can make it seem like there is nowhere to go if it’s not what the client was expecting.
This process can be easier over the phone or in-person than in email, so take a deep breath and jump on a call when possible.
Try to sort this out early on before anybody wastes too much time. And always remember that people value things they spend money on.
Pricing is always a tricky topic for freelancers, but it’s one of the most vital pillars of a successful business. Spend some time learning about pricing and the psychology behind it, and you can massively improve your business in a matter of days.